Tuesday, January 14, 2014

AbbVie doubles down on precision strike cancer treatments

Humira is really raking it in for AbbVie (NYSE: ABBV ) , but the good times will likely take a turn for the worse when the biologic goes off patent in a few years. For reasons I explained recently, Humira sales are more likely to slide down a bunny slope than fall off a patent cliff. Still, this revenue must be replaced somehow.

Trojan horses for cancer
Abbvie has extended its reach into targeted cancer treatments with antibody-drug conjugates (ADCs). These are monoclonal antibodies (MABs) that carry cell-destroying agents specifically to tumor cells. Instead of the carpet-bombing techniques used by standard chemotherapies, ADCs hang on to their toxic payload until they enter cancerous cells. In theory, patients should benefit from smaller, more effective infusions of toxic compounds.

Riskless in Seattle
Entirely content to take on the financial risk of developing a smaller biotech's compounds, AbbVie is leapfrogging into this interesting field of cancer therapies with ADC pioneers Seattle Genetics (NASDAQ: SGEN ) .

AbbVie expanded its partnership to include access to two proprietary technologies of Seattle Genetics: both pyrrolobenzadiazepine (PBD) dimer ADC and EC-mAb site-specific conjugation technologies. AbbVie paid $25 million upfront to use the technologies and will remain responsible for paying all the bills. Seattle Genetics also stands to earn up to $255 million in milestone payments and license fees, plus a percentage of any worldwide sales resulting from the partnership.

This is a huge win for both companies. AbbVie gets ahead in ADC technology fast. Seattle Genetics will turn either a small or large profit without further financial risk.